- Like new cars, new homes lose their value the moment they are purchased by their next owner.
- Older homes retain their resale value better, especially when they are located in a desirable area.
Not too long ago, I got a call from a couple who was moving to the suburbs. As has become the norm, the first thing they said was, “We only want to look at new construction.”
That can be a tough request. The towns in my market have been coveted for over a century because of their proximity to the lakefront, their great schools and the ease in commuting to the city.
Finding new construction can be a challenge.
In this particular situation, it only took one tour to show them all the available new construction within their price range; new construction comes at a premium price, and everything that was new and in their price range was either too small or in an undesirable location.
It was at that point that they reluctantly began to look at used homes.
Who said new means better?
As someone who grew up in an older home and always purchased vintage, I’m a little perplexed by this fixation with new construction. While I get it — it’s a lot easier to have newer appliances, finishes and features — new is just new … it’s not necessarily nicer or better.
New construction looks all the same to me, with the same kitchens, bathroom finishes, colors, features and rooms.
Boring.
An older home has history and character.
I think the real question should be, “Is this newer home going to be a better long-term value than this older home?”
The answer to that question is not always easy to determine; each house needs to be looked at individually.
Some of the older homes are phenomenal — beautifully constructed with quality materials, real plaster and lovely hardwood floors. They are in older and established neighborhoods, often closer to town, the beach and schools.
While they may need some updating or renovating, they are still wonderful homes.
Granted, there are also a lot of older homes that are functionally obsolete or in terrible condition and should probably be razed. The initial price may seem like a great value, but you’ll lose money if the house turns out to be a money pit.
Conversely, while it’s enticing to buy a new home, some of them are ghastly. The materials used are cheap or substandard and the designs lack imagination.
They command a premium because they are new, but, once again, new construction does not necessarily mean better construction or better value.
The value of location
An old home in a desirable location is going to have a greater value and long-term resale capability than a brand new home located near the toll road.
Just as with new cars, new houses lose their premium value once they’ve been used. That new home will eventually become a used home, and it will depreciate in value because of its less-than-optimal location.
I have found that that the hardest houses to sell are the ones that were built about 20 to 30 years ago and are in marginal locations. Many of them are even selling for less than their original new construction sales price.
Why?
Because they are not new and they are not in highly desirable neighborhoods.
I encourage my buyers to think long-term because long-term value is not necessarily a function of the age of a house.
So what about my only-new-construction buyers? Well, they ended up buying a wonderfully renovated 100-year-old home two blocks from the lake … and they love it!
Ann Jones has been a respected Realtor on the North Shore of Chicago for nearly 15 years. Her primary market is the Lake Forest/Lake Bluff area but serves clients along the shore as well. Follow her blog at anns-blog.com or on Pinterest.
